PayPal receives SEC subpoena over stablecoin

PayPal disclosed that it received a subpoena from the Securities and Exchange Commission’s division of enforcement on Wednesday.

The extent of the subpoena is unclear, though PayPal noted that the regulator is seeking documents, and it is actively cooperating with the subpoena.

“The subpoena requests the production of documents. We are cooperating with the SEC in connection with this request,” PayPal said in a form 10-Q.

PayPal launched its stablecoin back in August, marking the first foray into dollar-backed stablecoins by a traditional finance firm. 

The stablecoin is issued on Ethereum by Paxos Trust Co. A monthly reserve report on the stablecoin is also handled by Paxos, alongside an “attestation of the value of PayPal USD reserve assets.”

While the stablecoin initially received some praise, some in Washington also took a more critical view on the launch.

House Democrat Maxine Waters D-Cali. said she was “deeply concerned” about the new stablecoin in August.

She added that there needs to be “federal guardrails” on any “issuance of a new form of money.”

Chair of the House Financial Services Committee Patrick McHenry R-NC said that PayPal’s announcement was a “clear signal that stablecoins — if issued under a clear regulatory framework — hold promise as a pillar of our 21st-century payments system.”

McHenry’s committee passed the bipartisan Clarity for Payment Stablecoins Act, which “identifies regulatory paths for approving and regulating stablecoin issuers.”

The Democrats and Republicans struggled with the bill in markup, leading to politicians engaging in a shouting match in July.

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